RETAILING: Sportsmans Warehouse's Comeback
Recent Western Cape Business News
CAPE TOWN has always been home to the great retailers of SA – Pick n Pay, Woolworths, Shoprite, Foschini and Truworths.
But in the late nineties a very different kind of retail operation was taking shape in The Mill House in Canterbury Street on the edge of the Cape Town CBD.
That retail conglomerate was the Morkels Retail Group (Moregro). The company was strategically shaped by local businessmen Dods Brand and Joe Wolfson with the backing of mercurial German investor Claas Daun.
Moregro comprised mainly of the furniture retailer Morkels but it also held two specialist fashion retailers in the form of Bergers and a sportsware division comprising of Totalsports and Sportmans Warehouse.
Despite Brand and Wolfson being at the top of their game in the late nineties Moregro never reached its full potential.
To cut a long (and painful) story short, Duan decided to sell control of Moregro to Protea Furnishers (headed by Gerald Rubenstein - an investment man rather than a retailer).
Essentially Moregro was broken up. Morkels went into Profurn, which did not last long before being bought out of trouble by the JD Group.
Bergers ended up as part of a short-lived clothing retail listing called Fashion Africa. Totalsports and Sportsmans Warehouse – the focus of this story - ended up being listed under the Moresport banner.
Hopes were high for Moresport – cashing in, as it were, on a sports mad nation. The first Sportsmans Warehouse store was opened in Rondebosch in 1986 and ten years later the founders Eric Logan and Dave Stewart sold the business to Moregro, which had the muscle to drive the expansion of the mega-store format.
Moresport enjoyed a brisk start under Moregro, but under the new ownership structure and a less vibrant consumer market the business started to find the going tough – the biggest indication of strain coming when it sold Totalsports to Foschini for R75 million in 2000.
The rationale – at the time – for the sale of such a large chunk of the Moresport business was centred around a strategy to dominate “functional equipment driven categories” (bats, balls, raquets, sticks and so on) rather than ply the apparel and footwear market.
In other words concentrate on the ‘authentic side’ of the sports business rather than the ‘fashion’ side – including the development of another specialist leg in the form of Outdoor Warehouse.
Moresport’s success in this strategy, however, could not (until now) be gauged because the company was snatched off the JSE shortly after the Totalsports sale when Vestacor – a company controlled by Profurn’s Rubenstein - acquired 100% of the company.
Various corporate developments took place in the ensuing years – including the sale of the golf specialist the Pro-Shop and an unsuccessful attempt by Massmart to buy Moresport. In 2006 Vestacor bailed, and top rated private equity group Ethos took the role as anchor shareholder.
Moresport also took a new corporate guise as Holdsport.
It seems the ten years out of the public eye has done wonders for the last remnant of the Mill House – which has now re-listed on the JSE.
Growth at top line for both Sportsmans Warehouse and Outdoor Warehouse has been quite astounding. Sportmans Warehouse has seen turnover more than double in just seven years from R368 million in 2004 to R820 million in 2011. Outdoor Warehouse – with 17 stores - has quadrupled its turnover from R70 million in 2004 to R280 million.
Top line growth – which has obviously come with aggressive store expansion in both brands (there were just six Sportmans Warehouse outlets in the late nineties, now there are 33) – has fortunately not come at a cost.
With profitable expansion the key going forward, it is interesting to note in the pre-listing statement that Holdsport – headed by Kevin Hodgson - has very attractive new store economics with moderate capital expenditure and fast payback. Holdsport has an initial outlay (including capital expenditure and working capital) of approximately R7 million for a new Sportsmans Warehouse store and R5 million for a new Outdoor Warehouse store.
The average 2011 gross profit per store was around R4.4 million per Holdsport store, meaning that - based on the last 11 stores opened - the average pay back on capital invested is under 18 months.
Could we be looking at another Cape Town retailing legend in the making?
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